2024 Top Priorities

XOMA occupies a unique position in the royalty monetization space, one that is distinct from the vast majority of our competitors.  We focus our efforts across the lifecycle of drug development, from early stage assets entering the clinic to commercially available programs.  The underlying premise is to balance, over time, revenue generating assets that support our notional value with the high-risk, yet high-reward, early stage programs that have the potential to generate significant technology value for XOMA prior to commercialization.

Today, XOMA has five cash flow generating assets, up from one just over a year ago, including the recently approved OJEMDA™ (tovorafenib), Day One’s type II RAF inhibitor for relapsed or refractory BRAF-altered Pediatric Low-Grade Glioma (pLGG), the most common form of childhood brain cancer.  In addition, in a deal announced in late April, we acquired a royalty stream derived from the end user sales of XACIATO™ (clindamycin phosphate) vaginal gel 2%, which is marketed by Organon, one of the premier women’s health companies.  And by the end of 2024, assuming regulatory success, we anticipate having six cash flow generating assets, as Zevra Therapeutics’ arimoclomol for Niemann-Pick Type C disease has a PDUFA date in late September.  These assets either address a critical unmet need or possess a best-in-class profile that should generate significant cashflows for XOMA over time.

Capital Deployment

Relative to years past, the quantity, breadth, and attractiveness of the Company’s business development pipeline for royalty acquisitions is quite robust, likely a function of the external funding market, which has been subdued of late for early stage companies, and an increasingly proactive business development effort.  While we reviewed a number of interesting opportunities in 2023, our acquisition activity was limited by the lack of capital on our balance sheet.  The VABYSMO^® financing transaction significantly enhances our cash position and provides us with the opportunity to fulfill our objective of being a trusted partner and royalty capital solutions provider within the biotech ecosystem.

Much of our royalty portfolio is a legacy of XOMA’s BCE technology and Phage display libraries, although many of our most important and most valuable assets are a result of acquisitions completed in recent years.  Most of these acquisitions were sourced through our network of partners, including shareholders, investment banks, lawyers, and industry contacts.  And while we will look to continue to broaden our network, especially in emerging markets and Europe, we intend to take a more proactive approach in identifying potential opportunities for capital deployment.  With the pace of scientific achievement showing no signs of decelerating, we believe it will be increasingly important to identify and allocate capital to potentially game-changing therapies as a means to drive total shareholder return for XOMA stakeholders.

Capitalize on Our Value Proposition

The biotech funding market has certainly improved off the lows of 2022 and 2023, evidenced by the strength of the XBI (Nasdaq Biotechnology Index) in 4Q 2023 (+26%), and more recently, the reemergence of the biotech IPO and secondary equity offerings.  With that said, the market remains bifurcated, as the majority of the recent financings involve companies with late-stage compounds.  For earlier-stage companies or those still in search of proof-of-concept, a group that commands much of our interest, capital remains elusive, especially at a reasonable cost of capital.

Historically speaking, royalty and milestone monetizations were utilized as a financing of last resort.  Today, the virtues of this financing type are increasingly appreciated, not only by the management and Boards of our partners, but also by their shareholders.  Royalty financings provide risk-based capital, limit equity dilution, and often unlock hidden value to the benefit of all parties.

XOMA prides itself on providing bespoke royalty capital solutions, tailored to address the financial needs of our partners.  In 2024, in addition to being more proactive, we intend to use the assets within XOMA, namely our people, permanent capital structure, creativity, structuring experience, and patience, to capitalize on the current opportunities arising from the have and have nots.

Identify Opportunities to Unlock Value for Stockholders

There are multiple avenues by which we can build XOMA’s royalty portfolio, as well as build XOMA’s balance sheet.  We think creatively to identify the appropriate risk-adjusted opportunities that deliver cash to XOMA today and/or have the potential to generate cash for XOMA in the future.  This February, we announced the acquisition of Kinnate Biopharma.  While returning the majority of Kinnate’s cash to its stockholders, we expect we’ll add over $9.5 million, net, in non-dilutive cash to our balance sheet, as well as several precision oncology programs that we are actively seeking to monetize through sale or out-licensing.  This acquisition reflects one creative approach that unlocks value for both our stockholders and Kinnate’s investors – today and into the future.

Drive Total Shareholder Return

XOMA is unique among its peers, having only recently transitioned into the royalty space as of 2017.  At the end of 2023, we had approximately $160 million in cash and no corporate debt¹.  We have a small, but growing number of products that are generating royalties, followed by a visible pipeline that continues to mature with the passage of time.  Investors have an opportunity to participate in two separate publicly traded classes of stock (common – XOMA – and preferred – XOMAP and XOMAO) catering to different return objectives.

Our recently announced $50 million share buyback fulfills one of the key tenets that we outlined last year: returning capital to shareholders upon success.  We believe a balanced approach to capital allocation is important in both theory and practice.  In addition, in an effort to further align the interests of XOMA employees and our shareholders, we changed the equity compensation for every employee in the company, moving from options to performance stock units (PSUs) with strike prices significantly ahead of the prevailing stock price.